Retail sales fell in February as non-food retail sales decline for first time since 2011 according to early indicator

 
Jasper Jolly
General View Of Morrisons Supermarket
Non-food sales fell during February (Source: Getty)

Retail sales fell in February as non-food purchases recorded their first quarterly decline in more than five years, a survey ahead of official data shows.

Like-for-like sales fell by 0.4 per cent compared to February 2016, according to the retail sales monitor reported by the British Retail Consortium (BRC) and KPMG, despite food sales rising for the third consecutive month.

Non-food sales declined by 0.4 per cent in the quarter to February, the first time this has happened since November 2011, when UK unemployment peaked after the financial crisis.

Read more: Retail sales fell during January

Richard Lim, chief executive of Retail Economics, said: "These are pretty weak figures. They are the first real sign we've seen that rising inflation is effecting people's spending."

The BRC monitor pre-empts official government figures, which showed retail sales growth dipping to an annual rate of 1.5 per cent in January.

Consumer spending, of which retail sales are a large part, has been one of the pillars of the UK’s solid economic performance in the past year. After starting 2016 on a weaker footing, the UK economy accelerated at the end of the year as consumer spending surprised on the upside.

However, with inflation rising sharply because of the weaker pound, many economists expect a hit to demand from consumers. The response of British households to higher prices will go a long way towards determining the performance of the entire UK economy.

Read more: British consumers see no hit from Brexit

The recent strength of consumer spending could come under pressure as inflation outstrips wage growth. Lim warned: "Consumers react to their own personal experience of the economy."

Meanwhile, Helen Dickinson, chief executive of the British Retail Consortium, warned retailers could be caught short if demand falls.

She said: “Tougher times are expected ahead. The impact of inflation on consumer spending will add further intensity to an already fiercely competitive environment in which the ability to adapt and innovate will be key to survival.”

The Bank of England expects consumer spending to fall with “materially weaker” income, as pay levels fail to keep up with consumer prices, but it also noted in its last report on inflation that food retailers “may have absorbed the recent rises in external costs” in the battle to preserve market share.

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